A debt management program may be referred to as one of the methods by which you can reduce your debt burden. In this process, a credit counseling agency helps debtors by lowering the APR.
The right time to opt for debt management program-
A debtor may opt for a debt management program under the following circumstances-
• If a debtor has several debt accounts and is finding it difficult to manage them simultaneously, a debt management program may be opted for.
• A debtor is receiving collection calls from debt collectors and wants to avoid them.
• If a self repayment plan is not sufficient to bail out the debtor. He can opt for a DMP.
• If the debtor intends to improve his credit score, he can opt for a debt management program.
In a debt management program, commonly referred to as DMP, the debtor is required to make the single monthly payment to the credit counseling agency. The agency in turn manages the debts on behalf of the debtor. The credit counseling agency distributes the money to the respective creditors.
Types of debts covered by debt management program-
The following types of debts are covered under a debt management program-
• Medical bills
• Credit card bills
• Payday loans
• Student loans
In other words, unsecured debts are covered by the debt management program.
How does debt management program work?
• The credit counseling agency gathers details of all the debt accounts. Details include information about debt amount, APR, minimum payment etc.
• A budget is worked out by the agency and the debtors are also educated about efficient money management skills.
• The agency does all the negotiation with the different creditors and they settle for a lower monthly payment.
• A repayment plan is worked out by the credit counseling agency so that the debtor does not find it difficult to repay the outstanding balance.
• Once the single monthly payment is paid to the credit counseling agency, the same is paid to the respective creditors.
Benefits of a debt management program-
There are many benefits of a debt management program. Some of the noted benefits of a debt management program include the following-
• One can put an end to the collection calls from the collection agencies.
• A debtor does not have to shell out late fees or default payments.
• A debtor can enjoy lower rate of interest as well as lower monthly payments.
In addition to the above advantages, making payments on time will impact the credit report in a positive manner.
The right time to opt for debt management program-
A debtor may opt for a debt management program under the following circumstances-
• If a debtor has several debt accounts and is finding it difficult to manage them simultaneously, a debt management program may be opted for.
• A debtor is receiving collection calls from debt collectors and wants to avoid them.
• If a self repayment plan is not sufficient to bail out the debtor. He can opt for a DMP.
• If the debtor intends to improve his credit score, he can opt for a debt management program.
In a debt management program, commonly referred to as DMP, the debtor is required to make the single monthly payment to the credit counseling agency. The agency in turn manages the debts on behalf of the debtor. The credit counseling agency distributes the money to the respective creditors.
Types of debts covered by debt management program-
The following types of debts are covered under a debt management program-
• Medical bills
• Credit card bills
• Payday loans
• Student loans
In other words, unsecured debts are covered by the debt management program.
How does debt management program work?
• The credit counseling agency gathers details of all the debt accounts. Details include information about debt amount, APR, minimum payment etc.
• A budget is worked out by the agency and the debtors are also educated about efficient money management skills.
• The agency does all the negotiation with the different creditors and they settle for a lower monthly payment.
• A repayment plan is worked out by the credit counseling agency so that the debtor does not find it difficult to repay the outstanding balance.
• Once the single monthly payment is paid to the credit counseling agency, the same is paid to the respective creditors.
Benefits of a debt management program-
There are many benefits of a debt management program. Some of the noted benefits of a debt management program include the following-
• One can put an end to the collection calls from the collection agencies.
• A debtor does not have to shell out late fees or default payments.
• A debtor can enjoy lower rate of interest as well as lower monthly payments.
In addition to the above advantages, making payments on time will impact the credit report in a positive manner.
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